Xoogler.co: Startup Fundraising and Current Trends with Connie Chan, a16z General Partner
The Xoogler.co community’s first global event of 2021 featured a fireside chat with Connie Chan, a general partner at Andreessen Horowitz where she focuses on investing in consumer technology. Over 200 participants RSVP’d to hear Connie share her advice for founders and insights on the consumer space. The event was moderated by Insiya Lokhandwala, a partner at a16z and Xoogler.
Tips on Fundraising
Many founders were in the audience, and Connie discussed what makes startups stand out to investors.
Evaluating Companies
How investors evaluate companies usually boils down to the product, team, and market:
- Product: Investors are interested in the quality of the product and if it has good numbers. If the numbers show growth and potential, the startup will receive VC meetings.
- Team: The earlier it is, the more the team matters. Investors look for grit, insight, and a history of excellence. Investors are also looking at the company’s goals. When a founder’s pitch deck includes who can acquire the company, this is a red flag. It tells the investor that the founder has their eyes on selling.
- Market: This can be very thesis-driven. Many firms and partners believe a particular space is hot, so they want to meet all of the companies in that category.
Cold Messages
Cold messages can work. Warm referrals are better, but investors do look at cold messages. If a founder is cold messaging an investor, the message should include two lines on what they are doing and who they are, metrics that portray the company’s potential, and a short pitch deck. Pitch decks can range from 5–30 slides, but a good sweet spot is around 10 slides. It should include slides on the team, market size, problem, product, progress, traction, road map, and competition.
Standing Out as a Founder
A few aspects that can make a founder stand out to Connie are the company’s progress, the founder’s depth of thinking, and the founder’s sacrifices. If a founder has done a lot in a short amount of time, it shows they are resourceful and very hard working. The depth of the founder’s thinking shows if they have the expertise or insights to be successful where others may not have been. The founder’s sacrifices can show how committed they are and why they are excited to do something so risky.
What to Look For in Partners
When founders are looking for funding from partners, it should be a two-way street when pitching. Founders should do reference checks on the investors as well. They should choose someone who can help them have a higher chance of succeeding compared to another partner. This does not necessarily mean the investor is more famous or is at a bigger firm. Certain investors have access to knowledge or resources that will help the startup succeed.
Recommended read for first time fundraisers: Secrets of Sand Hill Road
Trends
Connie discussed the trends that she and a16z are interested in:
Valuations
Valuations are higher than they were before the pandemic. People would think that a pandemic would make people not want to invest, but this is not the case. Early-stage private valuations are high in the same way that is happening in the stock market. One could argue it is a great time to start a company right now.
Advertising
Advertising is not good enough as a monetization model. Tools such as Google Ads are so good that it takes up a large portion of marketers’ budgets. Another reason is that ads can be disliked by consumers. It’s better if they have lots of monetization options. Many media companies receive heavy traffic, but their valuations are low. Therefore, companies need to be more creative in monetization. In streaming platforms, this could be in the form of tipping, memberships, promoting that streamers sell to viewers, or other monetized actions where there are incentives that allow creators to engage more with the audience. Watch Connie’s presentation at the a16z Summit event to learn more.
Commerce
There are multiple opportunities in the commerce space. Connie believes many companies that are not commerce companies today will focus more on commerce. For example, companies like Instagram and TikTok have the mindshare, personalization, and pipeline to benefit from it. Connie also believes there is an opportunity for videos to be incorporated more in online shopping. Videos are a great way to tell stories, demo, unbox, and sell. Additionally, more can be done to solve the discovery problem in commerce. People on Amazon simply go straight to the search bar. Pinterest is good at helping people buy what they were not searching for, but there is still room to solve this discovery problem. Read more here.
Social Media
Optimism on investing in social media has returned. A year or so ago, there was a large consensus that there was no room to innovate because the social media space was taken by Instagram, Snapchat, and other established companies. Now there is a rise in new social networks, apps that allow strangers to meet strangers, and an increase in the need for tools that help creators and influencers monetize and grow their following. Read more here.
EdTech
The EdTech space has grown after the pandemic put a spotlight on all of the gaps in the US education system. Many entrepreneurs are on a mission to figure out how we can improve education. The good thing is that there is a market opportunity too since all parents want their kids to do well in school. There is a growing market for good alternatives that make learning better and cheaper. Learn more here.
More About Connie Chan
Connie started her career as a private equity investor at Elevation Partners focused on investing in media and entertainment. Then she joined HP to lead its webOS efforts in China. Connie joined Andreessen Horowitz in 2011 as a deal partner on the investment team and became a general partner in 2018. She is well known for her deep knowledge of the Chinese consumer technology landscape and often uses this knowledge to translate how trends move from Asia to the West.
Connie received her B.A. in Economics and M.S. in Management Science and Engineering from Stanford University. You can follow her on Twitter at https://twitter.com/conniechan.
More About Andreessen Horowitz
Sign up for a16z newsletters here. Review openings at 16z. If anyone is interested in working at an a16z portfolio company, they can email Ian Sharp.
More From Xoogler.co
Learn about future events through our monthly Xoogler Newsletter and Linkedin. If you found this article insightful, check out our Q&A with Michael Ma:
